Story of Selling a Damaged House in Elk Grove
There seems to be a lot of rehab investors, both in town and outside of Sacramento, who expect advance phone calls from listing agents, because they email me all the time about buying a damaged house. The worse, the better, they say. I wonder if they haven’t heard about MLS? You know, that place where all the listings go? Or, maybe they haven’t noticed that Zillow and Trulia are also pulling listings from MLS? Or, perhaps they think my supposed greedy little heart will seize the chance to smash my seller’s hopes and I’ll engage in some secret, behind-the-scenes deal with them to be the only buyer because all agents are money-grubbing fools? I’d say gag me but I’m recovering from the flu and don’t want to think about that reflex.
Take this damaged house in Elk Grove, for example. This was a short sale home that had been abandoned for a while — what we call a fixer. There were no utilities and, in fact, there were utility liens recorded against the property. It needed flooring, paint, a new roof, pest work, stucco repair and there was a minor plumbing leak in one of the upstairs’ bathrooms. The home was located in a popular neighborhood in Elk Grove. Even though it needed work, which meant few owner occupants would make an offer, it should have sold sooner than it did. The reason it didn’t is many rehab investors don’t want to go back to the old market of years gone by, it seems, they expect higher profit margins. Higher profit margins are typically not available in a short sale. Short sale banks typically won’t fund an investor’s bank account.
We put this on the market last May, and it sat for 3 months without a viable offer. We received a number of lowball offers but none high enough to where the comparable sales suggested the bank would accept the offer. See, guys don’t understand why we won’t take a low offer and send it to the bank. That’s because they’re not on the listing side, doing possibly a ton of work for zero results. I’m not completely alien to fixing up homes and flipping, as I did it myself for 10 years. I also know how to compute comparable sales and deduct for repairs.
Come August, we decided to take the highest offer we could get, which wasn’t enough to satisfy what we felt the bank would want, but since it involved a 203K loan, the buyer had room to move up, if necessary. It’s one thing if they pay cash and the bank wants more money. It’s quite another if the buyer plans to live there and is obtaining financing, so a $10,000 increase could mean a difference of only fifty bucks in a mortgage payment. Not surprising, the bank asked for a higher price, it demanded our original list price. See, I’m often right on the nose with how they think because I’ve been doing this for so long.
The buyer bailed. Fortunately, we found other buyers, several at one time. The seller chose the most committed buyer. I went back to the bank and negotiated a price somewhere between the lowball offer and the original list price. I know these are trouble, walking into these listings. It’s hard to show homes without electricity. It’s hard to get a loan without utilities. It’s almost impossible to get the bank to agree to allow payment of utility liens. And people are often afraid of abandoned homes with damage. These homes appeal to a small majority. Not to mention, the lowballers come crawling out of the woodwork looking for a steal, and it makes me feel like I should put on white socks so I can see the fleas jumping on me.
Throw on top of these situations, other individuals in title who won’t cooperate with a short sale, and a seller whose second mortgage was charged off but not reconveyed and therefore included in the short sale, all of which makes it a recipe for a whopping fun time.
Yet, it closed. They all eventually close. Because this Sacramento Realtor does not give up. If I can close a horrendous situation like this, imagine what I do with a beautiful home in Elk Grove that’s in pristine condition.